The pension freedoms trap. Is your UK pension affected?

Pension b e

On 6 April 2015 the retirement landscape for Brits all over the world changed dramatically. Pension freedoms were introduced, and people were given the choice to flexibly access their pensions from the age of 55. This gave people the option to take income in any manner they wished, so either via ad-hoc withdrawals or regular income of their choice.

This was the most radical reform to pensions that I have experienced in my career, offering my clients here in Spain so much more freedom with their retirement choices than before. Having spent over a decade helping people ‘plan’ their retirement, one fundamental challenge was to always ensure people did not outlive their retirement fund. I must admit that the idea of someone cashing their entire pension pot to fulfil a lifelong dream of owning a sports car or go on that worldwide cruise worried me!

Prior to pension freedoms it is estimated around 90% of people bought an annuity. Nowadays, according to FCA data, 55% of retirees choose to encash their pensions altogether, 34% opt to keep their pension invested either using flexible drawdown or taking lump sum payments and just 11% buy an annuity. Between April 2015 and January 2020, retirees have opted for flexible pension withdrawals totalling almost £33 billion.

Most of you will no doubt be aware of these freedoms by now. They have been well publicised over the last 5 years. However, what you may not be aware of is if your particular scheme offers such an arrangement, and indeed if this is available for those living outside the UK.

I have sat down with many of you over the last few months, and the same scheme names come up in our meetings over and again; ReAssure, Aviva, Zurich, Phoenix Life, Aegon etc. Part of my role when analysing a client’s pension options is to contact their current pension provider and ask appropriate questions that allow me to fully understand what is on offer and how that fits in with my client’s current and future needs.

Nearly every pension company I have contacted recently have confirmed that for their clients living overseas they could not offer full pension freedoms. They would have just 3 options: take the pension in full, transfer to a different scheme or take an annuity.

Taking your pension as a lump sum is not advisable as this would be exposed to up to 45% tax here in Spain. Annuity rates are at all-time lows, for example in 2015, a 65-year-old with a £100,000 pension could buy a yearly income of £5,447. The rates offered are now 13% lower, meaning a 65-year-old could only buy a yearly income of £4,723.

Another issue Brits are now facing is that as we stand, as of July 1st this year, your UK adviser can no longer advise on your UK pension if you live in Spain, so you may be left without either flexible access or advice.

So we are left in a situation where Brits in Spain need a local adviser and a pension solution that that offers flexibility to non-UK residents. That in itself is not an issue, at Chorus we work with Brits in Spain every day of the week helping them to find an appropriate scheme that gives them the flexible options they require.

Where the problem lies is when a client has no idea of the restrictions, and they only discover this when they are planning to access their pensions. Although transferring a pension is very common these days, the process requires an experienced adviser and can take several months of work.

Chorus advisers work with Brits in Spain to fully explore their pension options and to plan ahead for a stress free, tax efficient retirement. As a firm built on ethics, honesty and transparency, we guarantee no hidden fees, long tie-ins or nasty surprises. For a different kind of financial advice in Spain contact Chorus today on, call +34 965 641 163 or visit

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